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PAGE PAGE 6 財務工程 第一講次 Overview of Financial Engineering §1. The Scope of Financial Engineering 1. Definitions * John Finnerty (1988): Finnerty, J.D. (1988), “Financial Engineering in Corporate Finance: An Overview,” Financial Management, Winter 1988, pp. 14-33. “Financial Engineering involves the design, the development, and the implementation of innovative financial instruments and processes, and the formulation of creative solutions to problems in finance.” * Marshall and Bansol (1992): Marshall, John F. and Vipul K Bansol (1992), Financial Engineering: A Complete Guide to Financial Innovation, NY: Allyn Bacon, Inc. “Financial Engineering is the development and applications of financial technology to solve financial problems and the creation of value by the identification and exploitation of financial opportunity.” 2. Examples of Financial Engineering * Introduction of a revolutionary new product such as the first swap, the first mortgage backed product, the first zero coupon bond (strips), or the introduction of junk bonds to finance leveraged buy outs. * The extension of futures trading to a commodity or a financial instrument not preciously traded in a futures pit, the introduction of a swap variant, or the creating mutual fund with new focus. * The piecing together of existing products and processes: E.g., the use of the existing products to reduce a firm’s financial risks, to reduce the cost of a firm’s financing, to gain some accounting or tax benefit, or to exploit a market inefficiency. * Financial Engineering is not limited to corporate and institutional applications. For example, it can be directed at the retail (or customer) level, such as adjustable rate mortgages, cash management accounts, NOW account, IRAs and Keoghs, and various new form of life insurance. 3. Career for Financial Engineers * Investment banks * Commercial banks * Insurance companies * Corporate: Corporate finance, trading, investment and money manage